Monthly Archives: June 2017

U.S. Market Weekly Summary – Week Ending 06/30/2017

S&P 500 Posts 0.6% Weekly Decline, Led by Tech and Utilities; Financials, Energy Buck Drop

The Standard & Poor’s 500 index shed 0.6% this week as the technology and utilities sectors led most others into negative territory, although the financial sector jumped while the energy and consumer-discretionary stocks edged higher.

The market benchmark ended the week at 2,423.41, down from 2,438.30 last Friday. The technology sector had the biggest weekly percentage drop, down 2.9%, while the utilities sector declined 2.4% and health care lost 1.5%. Just three sectors rose this week; the financial sector rallied 3.3% while the energy sector added 0.6% and consumer-discretionary stocks eked out a gain of 0.1%.

Semiconductor stocks had some of the biggest declines of the week among technology stocks. Advanced Micro Devices (AMD) shares fell 12% amid reports the chip maker’s competitor, Nvidia (NVDA), will release two new crypto-currency-specific graphics processing units during Q3, which the market sees as posing a risk to AMD’s current offerings. However, shares of Nvidia were also down on the week, falling 6.0%, while shares of other chip companies or suppliers to the chip industry also declined.

In the utilities sector, decliners included American Water Works (AWK), which fell 3.9% on the week, and Southern Co. (SO), whose shares also declined 3.9%. Southern’s drop came as RBC Capital Markets trimmed its price target on the company’s stock to $53 from $54 while maintaining its investment rating at sector perform.

On the upside, the financial sector’s gainers included Regions Financial (RF), which climbed 7.9% in the past week as the regional bank operator said the Federal Reserve doesn’t object to its capital plan, which includes a buyback of up to $1.47 billion of common stock as well as a boost to the quarterly dividend rate. Among other financial gainers, BGC Partners (BGC) climbed 6.3% since last Friday as the brokerage company said it is expecting Q2 revenue to be near the high end of its previous forecast.

The advance in the energy sector came as crude-oil futures extended their winning streak to a seventh session Friday, marking the most consecutive days of gains since April, boosted by data showing daily average US output fell last week. Gainers included Devon Energy (DVN), which rose 4.9%; Newfield Exploration (NFX), which added 3.3%; and Murphy Oil (MUR), which gained 3.1%.

Market Insights 6/30/2017

Stocks Mixed in Final Trading Session of First Half of 2017

U.S. stocks finished the last trading session of the first half of 2017 mixed as tech issues succumbed to some late-day pressure. The major equity indexes were lower for the week, with the Nasdaq outpacing its peers for the steepest decline.

Some favorable earnings and economic data may have aided in today’s advance as Dow member Nike’s results were met with cheers and Chicago-area manufacturing activity unexpectedly jumped further into expansion territory. U.S.

Treasuries were lower, joining a wave of global yield gains in the wake of some recent rhetoric from central bank officials and the U.S. dollar was nearly unchanged, crude oil prices were higher and gold saw a minor decline.

The Markets..

The Dow Jones Industrial Average (DJIA) increased 63 points (0.3%) to 21,350

The S&P 500 Index gained 4 points (0.2%) to 2,423

The Nasdaq Composite declined 4 points (0.1%) to 6,140

In moderately-heavy volume, 952 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $1.11 to $46.04 per barrel and wholesale gasoline was $0.03 higher at $1.51 per gallon

The Bloomberg gold spot price decreased $4.29 to $1,241.22 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 95.69

Markets were lower for the week, as the DJIA was 0.2% lower, the S&P 500 Index declined 0.6% and the Nasdaq Composite tumbled 2.0%

Personal income and spending tick higher, Chicago PMI jumps

Personal income was up 0.4% month-over-month (m/m) in May, above the Bloomberg forecast of a 0.3% gain, and compared to April’s downwardly revised 0.3% increase. Personal spending ticked 0.1% higher last month, in line with expectations and versus April’s unrevised 0.4% gain. The May savings rate as a percentage of disposable income was 5.5%. The PCE Deflator was down 0.1%, matching expectations, after the prior month’s 0.2% rise. Compared to last year, the deflator was 1.4% higher, below estimates of a 1.5% gain. April’s y/y figure was un revised at a 1.7% increase. Excluding food and energy, the PCE Core Index was up 0.1% m/m, in line wih expectations, and the index was 1.4% higher y/y, matching estimates. April’s y/y figure was unrevised at a 1.5% increase.

The final May University of Michigan Consumer Sentiment Index was unexpectedly revised higher to 95.1 from the preliminary level of 94.5, where it was expected to remain. But the index is down versus May’s level of 97.1. Compared to last month, the expectations component dipped, while the current conditions component jumped. The 1-year inflation outlook remained at May’s 2.6% rate, while the 5-10 year forecast dipped to 2.5% from 2.6%

The Chicago Purchasing Managers Index surprising surged further into a level depicting expansion (above 50), after jumping to 65.7 in June—the highest since May 2014—from 59.4 in May, and versus the expectations of a decrease to 58.0.

Treasuries dipped, with the yield on the 2-year note gaining 1 basis point (bp) to 1.38%, the yield on the 10-year note adding 3 bps to 2.30% and the 30-year bond rate ticking 2 bps higher to 2.83%. Bond yields have rebounded from depressed levels and we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year “lower for longer” theme in the bond market. We expect the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn’t slip further.

Finally, the political front remains in focus with uncertainty being exacerbated by this week’s delayed Senate healthcare bill vote until after the July 4th holiday, while the debt ceiling debate continues and the markets are looking for any developments on tax and regulatory reforms, as well as other reflationary policy implementation.

Europe dips and Asia mixed following recent tech slide

European equities turned lower on some possible quarter end posturing with the markets continuing to grapple with the recent rallies in the euro and British pound and bond yields in the region. These moves have come courtesy of commentary from European Central Bank (ECB) President Mario Draghi and Bank of England (BoE) Governor Mark Carney that have caused some uneasiness that global central banks may be turning more hawkish.

The euro and British pound pared recent gains but bond yields continued to move higher. Also, the recent tech rollover that has pressured the markets also remained in focus, with the group showing some modest signs of stabilization. In economic news, German retail sales topped forecasts and the Eurozone consumer price inflation estimate came in a bit hotter than expected, while U.K. Q1 GDP growth was unrevised at a 0.2% q/q gain, as projected. The political front continued to garner attention ahead of key elections in the Eurozone and as U.K. Brexit negotiations are set to ramp up.

Stocks in Asia finished mixed on the heels of some upbeat Chinese business activity data, while technology issues weighed on the markets after leading U.S. equities solidly lower yesterday. Uneasiness amid the apparent shift among global central banks to a slightly-more-hawkish stance also hampered the markets. China’s official Manufacturing PMI Index surprisingly improved to 51.7 in June from 51.2 in May, and compared to the 51.0 level that was fore-casted, with a reading above 50 denoting expansion.

Additionally, China’s key services sector growth accelerated. Mainland Chinese shares ticked higher and those traded in Hong Kong declined. Japanese equities fell with the yen gaining ground, while the nation reported cooler-than-expected national consumer price inflation data for May, which was accompanied by an unexpected flat reading for consumer price inflation for Tokyo in June, versus expectations of a slight gain. Also, Japan’s household spending declined by a smaller amount than expected and industrial production dropped more than fore-casted in May. Australian and South Korean securities declined, while Indian stocks rose.

Tech selloff, central banks and quarter-end conspire to pressure stocks

U.S. stocks finished the week lower amid some posturing to close out a strong quarter. The global equity markets felt pressure from the continued rollover in the tech sector, which had helped drive the markets higher for the past year. Also, the markets appeared slightly shaken by an apparent shift in tone to slightly more hawkish from global central banks. ECB President Draghi noted that “the threat of deflation is gone and reflationary forces are at play,” while BoE Governor Carney said the discussion of beginning to remove stimulus will be on the docket in the months to come.

The euro and British pound rallied versus the U.S. dollar, leading to a weekly pullback for the greenback, while Treasury yields bounced off recent lows amid a jump in global bond rates. The downward move for equities was limited by a rally in financials on the recovery in bond yields and bolstered by upbeat results from the Fed’s latest banking sector stress tests, which opened the floodgates to a plethora of hiked dividends and share buybacks, headlined by Dow member JPMorgan Chase & Co. (JPM $91) and Citigroup Inc. (C $67). Energy issues also helped limit the damage as crude oil prices recovered from a recent tumble amid some resiliency in face of an unexpectedly bearish oil inventory data.

Next week, although the domestic markets will have an abbreviated session on Monday and be closed on Tuesday in observance of the Independence Day Holiday, the economic calendar will be robust possibly adding to the aforementioned central bank volatility. The week will commence with the release of the ISM Manufacturing PMI Index and monthly auto sales, while factory orders, the Fed’s June meeting minutes, the ISM non-Manufacturing Index, and trade balance will come after the break. However, the headlining report will likely be Friday’s June non-farm payroll report, which is expected to show job growth remains steady at a 175,000 pace and average hourly earnings continue to creep higher, rising 0.3% m/m.

Technology stocks have hit a speed bump as investors may be questioning the durability of the U.S. bull market. Economic confusion may be contributing to investor skepticism, as the labor market continues to tighten and housing is in good shape, but inflation has been in retreat along with commodity prices. Meanwhile, for the first time in a while, the Fed sounded slightly more hawkish at its June meeting. However, we believe strong earnings growth and a solid economy will continue to support further gains, but more volatility should be expected.

International reports due out next that deserve mention include: Australia—building approvals, retail sales, trade balance and the Reserve Bank of Australia monetary policy decision. China—Caixin’s manufacturing and services sector reports. India—manufacturing and services reports. Japan—Q2 Tankan Large Manufacturing Index. Eurozone—Markit’s business activity reports, retail sales and ECB monetary policy meeting minutes, along with German factory orders and industrial production. U.K.—Markit’s business activity reports, trade balance and industrial and manufacturing production.

Market Insights 6/29/2017

Stocks Off Lows, But Still Down on Close

U.S. stocks came off the lows of the day, but still saw significant declines as yesterday’s upbeat stress-test results that fueled gains for some big banks were overshadowed by another steep sell-off for the Nasdaq with tech listings nearly doubling the decline of most other depressed sectors.

Treasury yields were higher following some mostly lackluster economic data, while gold and the U.S. dollar were lower and crude oil prices were mixed.

The Markets…

The Dow Jones Industrial Average (DJIA) fell 168 points (0.8%) to 21,287

The S&P 500 Index dropped 21 points (0.9%) to 2,420

The Nasdaq Composite plummeted 90 points (1.4%) to 6,144

In moderately-heavy volume, 946 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.19 to $44.93 per barrel and wholesale gasoline was $0.01 higher at $1.48 per gallon

The Bloomberg gold spot price decreased $4.82 to $1,244.45 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 95.55

Jobless claims unexpectedly tick higher, final read on Q1 GDP surprisingly revised up

Weekly initial jobless claims rose by 2,000 to 244,000 last week, above the Bloomberg forecast of 240,000, with the prior week’s figure being upwardly revised by 1,000 to 242,000. The four-week moving average declined by 2,750 to 242,250, while continuing claims increased by 6,000 to 1,948,000, north of estimates of 1,935,000.

The final look (of three) at Q1 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 1.4%, adjusted up from the 1.2% expansion posted in the second and first reports, where it was expected to remain. Q4 GDP expanded by an unrevised 2.1% rate. Personal consumption came in at a 1.1% gain for Q1, above the preliminary estimate of a 0.6% increase, where it was expected to remain. Personal consumption grew by an unrevised 3.5% in Q4.

On inflation, the GDP Price Index was adjusted to a 1.9% gain, versus forecasts of an unrevised 2.2% increase, while the core PCE Index, which excludes food and energy, was adjusted to a 2.0% rise, compared to expectations of an unrevised 2.1% gain.

Treasuries traded lower, with the yield on the 2-year note rising 2 basis points (bps) to 1.37%, while the yield on the 10-year note advanced 4 bps to 2.27%, and the 30-year bond rate rose 3 bps to 2.82%. Bond yields continued a rebound from depressed levels. We expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year “lower for longer” theme in the bond market. We expect the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn’t slip further.

Tomorrow, the U.S. economic calendar will finish off the week with reports expected to include personal income and spending, with economists predicting a 0.3% m/m increase in income and a 0.1% rise in spending in May, shy of the 0.4% respective advances seen the month prior, and the Chicago Purchasing Managers Index for June, expected to show activity in the Midwest declined to 58.0 from the 59.4 posted in May, though a reading above 50.0 represents expansion. The last release for the day will be the final University of Michigan Consumer Sentiment Index for June, forecasted to remain at the preliminary level of 94.5, but below May’s final reading of 97.1.

Europe lower, Asia gains ground

European equities finished lower as the markets appeared to get weary in the midst of a rising hawkish tone among global central banks, though the financials sector was the lone group in the green. Banking stocks eked out a gain on the heels of the upbeat stress test results and actions in the U.S. and as bond yields in the region moved higher.

Stocks found pressure as the euro extended a recent run that has come on the heels of this week comments from European Central Bank (ECB) President Mario Draghi, which fostered a hawkish takeaway despite yesterday’s reports that ECB members said the markets misjudged his remarks.

Draghi pointed out a strengthening and broadening recovery, while saying that pressures on inflation are temporary and that “the threat of deflation is gone and reflationary forces are at play.” The British pound added to a recent jump to weigh on the U.K. markets in the wake of Bank of England Governor Mark Carney saying yesterday that policy makers may need to begin the removal of stimulus if the trade-off between growth and inflation continues to lessen and the central bank will discuss this in the coming months.

In economic news, German consumer price inflation unexpectedly rose and the nation’s consumer confidence surprisingly ticked higher. Also, eurozone economic confidence improved more than expected. Political uncertainty remained in focus ahead of key elections in the Eurozone and as U.K. Brexit negotiations are set to ramp up.

The U.K. FTSE 100 Index was down 0.5%, France’s CAC-40 Index dropped 1.9%, Germany’s DAX Index fell 1.8%, and Switzerland’s Swiss Market Index decreased 1.5%, while Spain’s IBEX 35 Index and Italy’s FTSE MIB Index declined 1.6%.

Stocks in Asia finished higher on the heels of yesterday’s rebound in the U.S., with banking stocks leading the way on optimism ahead of the favorable stress test results and as bond yields rose amid apparent hawkish global central bank commentary most recently out of the Bank of England. Japanese equities advanced with the yen slipping somewhat and despite a softer-than-expected read on the nation’s retail sales.

Australian securities rose with financials moving higher and commodity-related issues gaining ground, bolstered by the recovery in crude oil prices. Indian stocks ticked higher to snap a string of losses, though action was choppy amid derivative expirations. South Korean markets moved to the upside. Mainland Chinese shares increased and those traded in Hong Kong jumped, boosted by banking stocks. China is expected to report some key data on manufacturing and services sector activity tonight.

Market Insights 6/28/2017

Stocks Bounce, Financials Lead

U.S. equities posted solid gains with financials leading the way, adding to their recent rebound, and as Treasury yields at the mid-to-long end of the curve saw gains.

Technology issues stabilized from their recent tumble and energy stocks gained ground on an uptick in crude oil prices, despite an unexpected bearish inventory report.

The U.S. dollar finished nearly unchanged after a choppy session, on some euro volatility and as comments from Bank of England Governor Carney boosted the pound. Gold was higher.

The Markets…

The Dow Jones Industrial Average (DJIA) rose 144 points (0.7%) to 21,455

The S&P 500 Index increased 21 points (0.9%) to 2,441

The Nasdaq Composite jumped 88 points (1.4%) to 6,234

In moderate volume, 854 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.50 to $44.74 per barrel and wholesale gasoline was $0.02 higher at $1.47 per gallon

The Bloomberg gold spot price increased $3.03 to $1,250.20 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 95.99

Pending home sales unexpectedly decline, mortgage applications fall

Pending home sales declined 0.8% month-over-month in May, versus the Bloomberg projection of a 1.0% increase, and following the downwardly revised 1.7% drop registered in April. Compared to last year, sales were 0.5% higher, matching forecasts. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which surprised to the upside in May.

The MBA Mortgage Application Index fell 6.2% last week, following the previous week’s 0.6% rise. The drop came as an 8.6% fall in the Refinance Index was met with a 4.1% decline for the Purchase Index. The average 30-year mortgage rate remained at 4.13%.

The advance goods trade deficit narrowed more than expected to $65.9 billion in May, from the downwardly revised $67.1 billion in April, and compared to the Bloomberg expectation of $66.0 billion.

Preliminary wholesale inventories rose 0.3% m/m in May, versus forecasts for a 0.2% increase, and following April’s favorably revised 0.4% decrease.

Treasuries were mixed, as the yield on the 2-year note declined 2 basis points (bps) to 1.35%, while the yield on the 10-year note ticked 1 bp higher to 2.22% and the 30-year bond rate rose 2 bps to 2.77%. Bond yields have rebounded somewhat as of late from depressed yield levels. We expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year “lower for longer” theme in the bond market. We expect the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn’t slip further.

Finally, the political front remains in focus with yesterday’s delay in the Senate healthcare bill vote until after the July 4th holiday exacerbating uncertainty, while the debt ceiling debate continues and the markets are looking for any developments on tax and regulatory reforms, as well as other reflationary policy implementation.

Tomorrow’s economic docket will consist of the third and final read for Q1 GDP, with economists anticipating no revision to the quarterly 1.2% annualized growth rate in the second release, nor the 2.2% increase in personal consumption, as well as weekly initial jobless claims, forecasted to tick lower to 240,000 from the prior week’s 241,000.

European mixed amid euro and pound volatility, Asia mostly lower on uncertainties

European equities finished mixed following a brief afternoon recovery on a short-lived reverse to the downside for the euro on reports that European Central Bank (ECB) members are saying the markets misjudged President Mario Draghi’s comments yesterday. The euro moved back into the green, extending yesterday’s rally that came as the markets appeared to have a hawkish takeaway from Draghi’s speech. He pointed out a strengthening and broadening recovery, while saying that pressures on inflation are temporary and that “the threat of deflation is gone and reflationary forces are at play.” Bond yields in the region finished mixed.

The British pound rallied versus the U.S. dollar as Bank of England Governor Mark Carney said policy makers may need to begin the removal of stimulus if the trade-off between growth and inflation continues to lessen and the central bank will discuss this in the coming months. Oil & gas issues pared early pressure as crude oil prices reversed losses. Political uncertainty continued to linger ahead of key elections in the eurozone and as U.K. Brexit negotiations are set to ramp up. In economic news, French consumer confidence jumped and Spanish retail sales rebounded.

The U.K. FTSE 100 Index was down 0.6%, France’s CAC-40 Index dipped 0.1%, Germany’s DAX Index decreased 0.2%, and Switzerland’s Swiss Market Index finished flat, while Spain’s IBEX 35 Index rose 0.5% and Italy’s FTSE MIB Index gained 1.2%.

Stocks in Asia finished mostly lower following the declines in the U.S. and Europe yesterday that came courtesy of the continued rollover in technology stocks, the delayed U.S. healthcare bill vote and hawkish commentary from ECB President Draghi that boosted the euro. Japanese equities declined, with the yen choppy following a recent decline. Mainland Chinese stocks and those in Hong Kong declined amid the aforementioned headwinds, and ahead of Friday’s release of manufacturing and services sector reports. Meanwhile, Australian securities advanced nicely, led by strength in basic materials, oil & gas and financial issues amid a rise in global bond yields and continued rebound in crude oil prices, while markets in South Korea and India declined.

Tomorrow’s international economic calendar will include retail sales and the trade balance from Japan, CPI from Spain, consumer and business confidence from the Eurozone, and CPI from Germany.

Market Insights 6/27/2017

Stocks Slip, Senate Vote Delayed

U.S. equities reversed course after it was announced that the Senate would delay the vote on the health care bill until after July 4.

Technology stocks continued their descent, getting pressure from a report that Google received a record $2.7 billion fine from the EU, and pushing the Nasdaq solidly lower, while the markets showed little reaction to Fed Chair Yellen’s speech in London.

Treasury yields, crude oil prices and gold all rose, while the U.S. dollar was noticeably lower.

The Markets…

The Dow Jones Industrial Average (DJIA) fell 99 points (0.5%) to 21,310

The S&P 500 Index declined 20 points (0.8%) to 2,419

The Nasdaq Composite tumbled 101 points (1.6%) to 6,147

In moderate volume, 883 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.86 to $44.24 per barrel and wholesale gasoline was $0.02 higher at $1.45 per gallon

The Bloomberg gold spot price increased $5.70 to $1,250.42 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 1.0% lower at 96.41

Consumer Confidence unexpectedly improves, home price gains miss forecasts

The Consumer Confidence Index improved to 118.9 in June from the downwardly revised 117.6 in May, and compared to the Bloomberg estimate of a 116.0 reading. Sentiment toward the present situation improved, more than offsetting a dip in expectations of business conditions for the next six months. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 14.8 from the 11.7 level posted in May.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 5.7% gain in home prices y/y in April, versus expectations of a 5.9% increase. Month-over-month (m/m), home prices were up 0.3% on a seasonally adjusted basis for April, below forecasts of a 0.5% gain.

The Richmond Fed Manufacturing Activity Index increased to 7 in June from 1 in May, moving further into expansion territory (a reading above zero), and versus expectations of a 5 reading.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.37%, the yield on the 10-year note gained 6 bps to 2.20%, and the 30-year bond rate advanced 5 bps to 2.75%. Bond yields have remained depressed and in the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year “lower for longer” theme in the bond market. We expect the Federal Reserve to continue to tighten monetary policy and reduce its balance sheet gradually, assuming inflation doesn’t slip further. We continue to suggest investors target an average fixed income portfolio duration in the short-to-intermediate term, or about three to seven years.

Tomorrow’s economic calendar will be busy, beginning with the advanced goods trade balance, forecasted to show that the deficit shrank in May to $66.0 billion, followed later in the morning by pending homes sales, with economists expecting a 1.0% m/m rise for May following the 1.3% drop in April, as well as preliminary wholesale inventories, anticipated to have risen 0.2% during May. MBA Mortgage Applications will also be released.

Europe pressured as euro rallies on Draghi’s comments, Asia mixed

European equities finished broadly lower, coming off yesterday’s advance, with the euro rallying to pressure the markets following comments from European Central Bank (ECB) President Mario Draghi, which appeared to foster a slightly more hawkish takeaway.

Draghi pointed out a strengthening and broadening recovery, while saying that pressures on inflation are temporary and that “the threat of deflation is gone and reflationary forces are at play.” However, he did reiterate that prudence in adjusting policy is still needed, per Bloomberg. The comments came ahead of today’s speech in London by U.S. Federal Reserve Chairwoman Janet Yellen. Bond yields in the region gained ground. The British pound also finished higher versus the U.S. dollar.

Stocks in Asia finished mixed with the markets awaiting speeches from central bank heads in Europe and the U.S., while stabilization in crude oil prices offered little support. Japanese securities increased, as the yen held onto Monday’s losses that snapped a string of gains. Mainland Chinese stocks showed some late-day resiliency, advancing slightly, but equities in Hong Kong dipped marginally on the heels of softer-than-expected trade data out of Hong Kong and an acceleration in China’s May industrial profits.

Markets in Australia declined, with strength in basic materials and financials being met with weakness in health care and oil & gas issues, South Korean equities ticked higher, while stocks in India decreased in their return to action following yesterday’s holiday break and as the markets eyed the first meeting between U.S. President Donald Trump and Prime Minister Modi.

Tomorrow’s international economic calendar will focus on reports from across the pond, including import prices from Germany, retail sales from Spain, and PPI and CPI from Italy.

Market Insights 6/26/2017

Stocks Mixed

U.S. equities finished mixed and near the unchanged mark, as a rise in financials, despite a decline in Treasury yields, were offset by continued volatility in technology issues that hamstrung the Nasdaq.

Crude oil prices moved higher and gold was lower, while the U.S. dollar was unchanged.

On the economic front, durable goods orders missed forecasts, while some regional manufacturing activity remained in expansion territory.

The Markets…

The Dow Jones Industrial Average rose 15 points (0.1%) to 21,410

The S&P 500 Index nearly a point higher to 2,439

The Nasdaq Composite lost 18 points (0.3%) to 6,247

In moderate volume, 795 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.37 to $43.38 per barrel and wholesale gasoline was $0.01 higher at $1.43 per gallon

The Bloomberg gold spot price decreased $12.77 to $1,243.94 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.43

Durable goods orders miss

May preliminary durable goods orders dropped 1.1% month-over-month (m/m), compared to the Bloomberg estimate of a 0.6% decline, and April’s 0.8% decrease was revised to a 0.9% fall. Ex-transportation, orders were 0.1% higher m/m, compared to forecasts of a 0.4% gain and versus April’s unrevised 0.5% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.2%, versus projections of a 0.4% increase, and the upwardly revised 0.2% rise posted in the month prior.

We feel many investors may be questioning the durability of the U.S. bull market, but we believe strong earnings growth and a solid economy will continue to support further gains, but more volatility should be expected. Economic confusion may be contributing to investor skepticism, with the labor market continuing to tighten and housing in good shape, but inflation has been in retreat along with commodity prices. Meanwhile, for the first time in a while, the Fed sounded slightly more hawkish at its June meeting.

The Dallas Fed Manufacturing Activity Index declined more than expected but remained at a level depicting expansion (a reading above zero). The index decreased to 15.0 in June, from 17.2 in May, and compared to the expected decline to 16.0.

Treasuries finished higher, as the yield on the 2-year note fell 2 basis points to 1.33%, the yield on the 10-year note dipped 1 bp to 2.13% and the 30-year bond rate is decreased 2 bps to 2.70%. Bond yields remain depressed amid the economic confusion and political uncertainty.

Tomorrow’s economic calendar will begin with the S&P/Case-Schiller Home Price Index, predicted to show the 20-city composite rose 5.9% year-over-year and 0.45% on a seasonally-adjusted basis month-over-month in April, as well as the Consumer Confidence Index, with economists expecting a slight down-tick to a level of 116.0 for June from the 117.9 posted in May, and the Richmond Fed Manufacturing Index will round out the day.

Europe higher on eased Italian bank concerns, Asia mostly higher as oil stabilizes

European equities finished broadly higher, with financials getting a boost from news that Italy has moved to bailout two ailing regional banks, while a read on German business confidence unexpectedly improved for June. Oil & gas issues gave up a modest advance as crude oil prices were choppy in the wake of a recent tumble.

The euro and British pound ticked higher versus the U.S. dollar, while bond yields in the region finished mixed. The markets shrugged off festering political turmoil overseas, including upcoming elections in Italy and Germany later this year and as the U.K. preps for intensified Brexit negotiations.

Stocks in Asia finished mostly higher to begin the week, with crude oil prices stabilizing after last week’s drop, while Chinese markets led the way amid optimism about MSCI inclusion of mainland shares and speculation that state-backed funds were helping support the markets, per Bloomberg. Both mainland Chinese stocks and those traded in Hong Kong advanced. Japanese equities ticked higher, with the yen nudging lower, while securities in Australia and South Korea finished higher. Markets in India were closed for a holiday.

Tomorrow’s international economic calendar will include consumer sentiment from South Korea as well as business and consumer confidence from Italy.

First Half YTD Update

Year to date through June 23, the S&P 500 rose 8.9% in price, more than twice the average gain during the first six months of all years since 1946. It was accompanied to the upside by nine of its 11 sectors and two out of three of its 125 sub-industries.

Now the question is “Since the market did so well in the first half of the year, should we expect a sub-par performance during the second-half?” Well if history is any guide, for it’s never gospel, investors would be wise to prepare for a favorable second-half return.

Since WWII, the S&P 500 gained an average of 4.0% and 4.2% during the first and second halves, respectively, and recorded an average 8.6% advance for the entire year. What’s more, the market rose in price in 69% of all second halves. Yet when the 500’s first-half price gain was between 7% and 12%, or the second-highest quintile of H1 (1st half) returns, the market went on to record an average price rise of 5.1% during the second half and posted a positive H2 (2nd half) performance an above-average 87% of the time.

Should the historical H2 price rise for this second quintile be recorded, the S&P 500 will close the year around the 2565 level. While this forward six-month level for the S&P 500 approximates our 12-month target, based on current EPS and inflation projections, history implies that we may be underestimating the market’s rest-of-year potential.

U.S. Market Weekly Summary – Week Ending 06/23/2017

S&P 500 Edges Up 0.2% on Week as Health Care Jumps, Tech Climbs But Most Other Sectors Decline

The Standard & Poor’s 500 index edged up 0.2% this week, as gains in just three sectors–health care, technology and real estate–managed to outweigh declines posted across all other sectors.

The market benchmark closed Friday’s session at 2,438.30, up from 2,433.15 last Friday. This marks the second week in a row of small weekly moves; last week, it eked out a 0.1% gain.

The health-care sector, the biggest gainer of the week, jumped 3.6% as Senate Republicans unveiled their plans to overhaul the Affordable Care Act. Investors in the sector were encouraged by proposed repeals of a tax on health-insurance plans and of a levy on medical devices.

Gainers in the health-care sector included Gilead Sciences (GILD), which climbed 10% this week. The stock was boosted not only by the prospects of the Senate Republicans’ health-care plans but also by Health Canada’s approval of Gilead’s Vemlidy treatment for adults with chronic hepatitis B virus infection with compensated liver disease.

Other advancers in the health-care sector included Centene (CNC), which rose 7.0% this week; the company provides services to government-sponsored health-care programs, focusing on under-insured and uninsured individuals. Envision Healthcare (EVHC), a provider of physician-led services and post-acute care as well as ambulatory surgery services, added 3.4%.

Technology stocks made up the only other sector that rose significantly this week, up 2.3%; the third sector that rose, real estate, edged up just 0.1%. The technology sector’s gainers included Oracle (ORCL), whose shares rose 13% as the technology company focused on cloud applications and platform services reported fiscal Q4 results above analysts’ expectations and forecast Q1 earnings in line to above the Street view. Advanced Micro Devices (AMD) shares increased 24% as the semiconductor company launched its new generation Epyc 7000 series chips for use in data-center processors, challenging rival Intel (INTC) for the lucrative market.

On the downside, the energy sector had the biggest drop of the week, down 2.9%, as crude-oil futures on Wednesday hit their lowest price in more than 10 months amid continued concerns about a global supply glut. The category’s decliners included Noble Energy (NBL), whose shares shed 4.4% on the week as the energy company also reached an agreement to acquire additional interests in Colorado River DevCo and Blanco River DevCo for $270 million. Other decliners in the energy sector included Marathon Petroleum (MPC), which fell 4.2% on the week.

Market Insights 6/22/2017

Stocks Fade Late

U.S. equities closed the regular trading session mostly flat as markets were unable to hold gains that followed an afternoon surge in healthcare stocks on the heels of the Senate unveiling its bill to replace the Affordable Care Act.

Treasuries were higher following economic reports that showed weekly jobless claims increased, leading indicators matched expectations and regional manufacturing activity was better than expected.

Gold and crude oil prices moved higher and the U.S. dollar was flat.

The Markets…

The Dow Jones Industrial Average (DJIA) declined 13 points (0.1%) to 21,397,

The S&P 500 Index decreased 1 point to 2,435, and

The Nasdaq Composite gained 3 points to 6,237.

In moderately-heavy volume, 841 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq.

WTI crude oil gained $0.21 to $42.74 per barrel and wholesale gasoline ticked $0.02 higher to $1.43 per gallon. Elsewhere,

The Bloomberg gold spot price increased $3.53 to $1,250.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 97.55.

Jobless claims higher than expected and leading indicators match projections

Weekly initial jobless claims increased by 3,000 to 241,000 last week, above the Bloomberg forecast of 240,000, with the prior week’s figure upwardly revised at 238,000. The four-week moving average increased by 1,500 to 244,750, while continuing claims increased by 9,000 to 1,944,000, north of estimates of 1,928,000.

The Conference Board’s Index of Leading Economic Indicators (LEI) for May rose 0.3% month-over-month, matching projections and compared to last month’s downwardly adjusted 0.2% increase. The biggest positive contributor to the index was interest rate spread, while the largest negative contributor was building permits.

The Kansas City Fed Manufacturing Activity Index for June increased to 11, from May’s 8 reading, topping forecasts of a rise to 9, with a level north of zero depicting expansion.

Treasuries finished slightly higher with the yields on the 2-year note and the 30-year bond declining 1 basis point to 1.34% and 2.72%, respectively and the yield on the 10-year note decreasing 2 bps to 2.15%. The bond market continues to confound the experts. Each year since the end of the recession in 2009, consensus expectations have called for higher bond yields and the death of the 35-year bond bull market. Yet 10-year Treasury yields are now nearly 200 basis points (2%) lower than in 2010.

Tomorrow, the U.S. economic calendar will bring a look at the housing sector in the form of the May new home sales report, with economists expecting a 3.7% month-over-month increase to a rate of 590,000 units after dropping by 11.4% m/m to 569,000 units in April, as well as Markit’s preliminary Manufacturing and Services PMIs for June with the manufacturing index forecasted to inch higher to 53.0 from 52.7 and the services index expected to tick lower to 53.5 from 53.6. Readings above 50 for both indexes denote expansion in activity.

Europe and Asia finish mixed

European stocks finished trading mixed as healthcare issues received a late-session boost after the U.S. Senate released details of its bill aimed at replacing the Affordable Care Act. Markets in the region were initially weighed down as the recent pressure that pushed oil prices into bear market territory, declines in commodity-linked issues and political uncertainty fostered some caution among market participants. Amid the pullback in oil and other commodities, investors have been vigilant of potential downward pressure on inflation and how that may impact central bank policies.

In other developments in the region, the Bank of England’s chief economist said that it may be prudent to withdraw some stimulus in the second half of the year and that he is likely to vote for a rate hike as long as the economic data justifies it, per Bloomberg. Also, U.K. Prime Minister Theresa May arrived in Brussels where she is expected to discuss Brexit details with European Union leaders as a two-day European Council meeting commenced. In light regional economic news, business confidence figures from France were better than expected, while a read on manufacturing confidence was just shy of forecasts. The euro and British pound moved slightly lower versus the U.S. dollar, while bond yields in the region were mostly lower.

Global trade will likely garner some attention in the near future; at the end of the month brings the end of the 90-day trade review ordered by President Trump to identify trade abuses. Various experts explain that trade growth can have a meaningful impact on corporate revenue growth and, as a result, drive earnings and stock price performance. Fortunately, global trade growth looks set for the highest pace in a decade, with the exception of the snapback in 2010-11. This is indicated by the export orders component of the Eurozone purchasing managers’ index (PMI), which has done a good job of forecasting global trade growth in the months ahead.

The U.K. FTSE 100 Index decreased 0.1%, Italy’s FTSE MIB Index fell 0.7%, Spain’s IBEX 35 Index declined 0.3%, France’s CAC-40 Index was down 0.3%, Germany’s DAX Index ticked 0.1% lower, and Switzerland’s Swiss Market Index traded 0.5% higher.

Stocks in Asia finished mixed following yesterday’s dip in crude oil prices, while technology companies advanced on the heels of gains for the group in U.S. trading. Mainland Chinese shares dipped after gaining ground in the previous session following the announcement that MSCI will include its A-shares in the company’s emerging markets indexes after rejecting its prior three attempts to join. Stocks trading in Hong Kong were also lower.

Japanese equities realized losses for a second-straight day following the decline in crude oil prices, while volatility for the Japanese Nikkei 225 Index was near the lowest levels in over a decade and the yen strengthened versus the U.S. dollar. Indian listings finished flat, though on Wednesday the Securities and Exchange Board of India relaxed takeover and restructuring rules for companies with stressed assets, per Bloomberg. Finally, South Korean equities advanced and Australian securities were led higher by a recovery in some energy and materials stocks after selling off the previous session.

Major reports from the international economic docket for tomorrow will be limited to releases from across the pond with GDP from France and industrial orders from Italy, while we will also receive preliminary Markit Manufacturing and Services PMIs from the Eurozone, Germany and France.

Market Insights 6/21/2017

Markets Mixed

U.S. stocks finished the regular trading session mixed as gains in healthcare and technology issues were tempered by pullbacks in financial and energy equities with the latter group finding pressure despite an upbeat oil inventory report and amid some speculation with regard to Chinese crude demand.

Treasuries were nearly unchanged following domestic data that showed a surprising rise in existing home sales and mortgage applications increased. The U.S. dollar was slightly lower and gold experienced minor gains.

The Markets…

The Dow Jones Industrial Average declined 57 points (0.3%) to 21,410

The S&P 500 Index decreased 1 point (0.1%) to 2,436

The Nasdaq Composite gained 46 points (0.7%) to 6,234

In moderately-heavy volume, 829 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.98 to $42.53 per barrel and wholesale gasoline lost $0.01 to $1.41 per gallon

The Bloomberg gold spot price increased $3.38 to $1,246.39 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.55

Existing home sales jump, mortgage applications rise

Existing-home sales in May increased 1.1% month-over-month to a 5.62 million annual rate compared to the Bloomberg forecast of a decline to a 5.55 million pace, and up from April’s negatively revised 5.56 million rate. Sales of single-family homes increased 1.0% m/m and purchases of multi-family structures rose 1.6%, and both were up y/y. The median existing-home price was up 5.8% y/y at $252,800, an all-time high. Unsold inventory came in at a 4.6-month pace at the current sales rate, up from April’s 4.2 months pace and the 4.7 months rate a year ago. Inventory of homes for sale was up 2.1% m/m, but is down 8.4% y/y and has fallen for 24 consecutive months. Sales increased in all regions except for the Midwest. Existing home sales are based on contract closings instead of signings and account for the majority of the housing sales market.

National Association of Realtors (NAR) Chief Economist Lawrence Yun said that sales activity expanded as more buyers were able to overcome an increasingly challenging market. Yun said, “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions,” adding “With new and existing supply failing to catch up with demand, several markets this summer will continue to see homes going under contract at this remarkably fast pace of under a month.”

The MBA Mortgage Application Index increased 0.6% last week, following the previous week’s 2.8% rise. The advance came as a 2.1% jump in the Refinance Index was met with a 1.0% decline for the Purchase Index. The average 30-year mortgage rate remained at 4.13%.

Treasuries finished nearly unchanged, as the yields on the 2-year and 10-year notes were flat at 1.35% and 2.16%, respectively, and the 30-year bond ticked 1 basis point lower to 2.73%. Treasury yields have remained in a trading range amid a host of domestic and European political uncertainty, mixed economic data, and last week’s highly-expected rate hike by the Fed and details of the process in beginning to shrink its balance sheet sometime this year.

Investors continue to keep an eye on the various speeches by Federal Reserve officials after some hawkish comments coming from Federal Reserve Bank of New York President William Dudley, as other speeches at various engagements are slated for today and throughout the remainder of the week. As noted previously, we believe the market will likely largely look past the expected FOMC rate hike, and focus more on any information with regard to the Fed’s balance sheet. It is now expected that the Fed will begin the process of slowly reducing its bloated balance sheet by the end of this year, but that process (and commentary surrounding it) could be a source of elevated volatility in the months to come. And our continued belief is that the bull market has legs, but why investors should be aware that risks are elevated.

Tomorrow, the U.S. economic calendar will offer weekly initial jobless claims, forecasted to have ticked higher to a level of 240,000 from the 237,000 last week and the Index of Leading Economic Indicators (LEI), with economists anticipating a 0.3% m/m rise in May, matching the gain seen in April. Rounding out the day will be the June Kansas City Fed Manufacturing Index, anticipated to have increased to a level of 9 from 8 in May, with a reading above 0 indicating expansion in activity.

Europe and Asia mostly lower

European equities booked a second day of losses, with markets in the region lower across the board as crude oil was the main theme. Ongoing Brexit talks were also a focus after negotiations officially began Monday in Brussels. The British pound was lower as the nation is set to begin a new parliamentary session with Prime Minister Theresa May’s party in the minority. In a ceremony to mark the formal opening of the new parliament, Queen Elizabeth II gave a speech, providing a framework of what lawmakers will contemplate over its term. The nation’s government is looking at eight new laws in order to facilitate a smoother transition from the European Union.

In economic news, industrial orders in Spain fell during the month of April, and public sector net borrowing in the U.K. declined from the month prior. The euro also lost ground versus the greenback and bond yields in the region were mixed.

Stocks in Asia finished lower, following in the steps of the U.S. markets, with the drop in crude oil prices pressuring resource-related issues and technology shares paring some recent strength, and despite MSCI giving China the thumbs-up. Japanese equities fell, with the yen gaining strength throughout the session, and despite a report that showed marked improvement in the nation’s production in all sectors.

Mainland Chinese shares were able to buck the downtrend in the region on news that MSCI gave the Asian nation the green light to include its A-shares in the company’s emerging markets indexes after rejecting its request the prior three attempts. MSCI said it will add 222 of China’s Large Cap stocks from last year. However, stocks trading in Hong Kong fell on worries that China’s MSCI inclusion could spark competition and jeopardize its role as a vital entryway to China for global investors. South Korean equities dropped and Indian securities were flat.

Markets in resource-rich Australia fell as the tumble in crude oil prices and iron ore hit mining and energy stocks hard. Meanwhile, banks continued to suffer following yesterday’s downgrade by Moody’s of twelve of the nation’s lenders, including its four largest banks. The international economic docket for tomorrow will be light, offering only business confidence and production output from France.